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24
May
With two pubs closing every day, why is it so hard to survive in the hospitality industry?
When the Black Lion at Skelton-on-Ure reopened in November after six years of closure, there were high hopes that it would provide a blueprint for success that other village pubs could emulate.
Refitted by the community that owns it and relaunched by a dynamic and experienced couple, it promised to be what so few others had achieved: a thriving village hub with plenty of reasons to keep going back. Our own report on it was headlined: 'How a village pub's rebirth can be a beacon of hope for communities everywhere'.
But last weekend, the couple who had put their heart and soul into making it work announced via Facebook that they would be calling time for the last time, adding:
Sadly, despite our very best efforts, the reality of the hospitality industry at the moment, particularly for independent rural pubs, has made it impossible for us to continue sustainably.
The Black Lion in Skelton-on-Ure.
As a result, the Black Lion closed its doors yesterday, and there is no word yet as to when, and under what arrangement, it might reopen.
But it is far from an isolated case. In 2025, pubs closed permanently at a rate of one a day in England and Wales, according to an end-of-year report in The Guardian. This month, the British Beer and Pub Association (BBPA) said the rate for the first quarter of 2026 was two a day – so it appears the pub failure rate is accelerating.
'A lot of moving parts to think about'
Everyone knows that current economic conditions do not make for easy trading, but what is it that is making life so very difficult for so many in the hospitality industry in particular?
We asked entrepreneurial publican Simon Midgley – 25-year industry veteran, chairman of Harrogate BID, and owner of thriving independent bar Starling.
He told the Stray Ferret:
In hospitality, there are fluctuations in turnover, customers, and the prices of food and energy, and it’s very difficult to manage that.
It just takes a few small things where you take your eye off the ball to lose your profit altogether. You can appear really busy, but busyness alone doesn’t mean you’re doing OK. Hoxton North [the popular Harrogate café bar that closed for good in March] was always busy, but it had to close. There are a lot of moving parts to think about.
Simon Midgley, BID chair and owner of Starling in Harrogate.
'It's the volume of costs that makes life difficult'
Of course, to see why any business is struggling, you have to look at the finances, and it’s here where the industry as a whole is under the cosh.
Mr Midgley said:
There are lots of costs: National Insurance, the minimum wage, VAT, business rates... I wouldn’t say any one of these is more damaging than the others – it's just the overall volume of tax and costs that makes things difficult.
VAT is at 20%, and just the National Insurance alone has added £8,000 in costs to our relatively small business. Business rates have gone up too, even though they’re discounted.
All these costs accounted for £330,000 last year – that’s over a quarter of our gross turnover.
Hoxton North is now closed.
He said the rapid rise in staffing costs was particularly hard to accommodate:
In a mixed food and drink set-up, staff wages 25 years ago accounted for 15 to 20% of turnover – that was a good operating level. But now it’s more like 35 to 40%.
I don’t begrudge the minimum wage going up – it's the right thing to do – but when that happens at the aggressive speed it has, you can’t possibly pass the cost on to the customer by putting up prices. It doesn’t work like that.
So as an industry we’ve been soaking up the extra cost, and that’s compressed potential operating profit at a time when other things are going up too, such as energy costs.
The supermarkets' 'unfair advantage'
Mr Midgley said that pubs and bars are also at a disadvantage to the supermarkets, with a food-and-drink ‘double whammy’. Not only can they stock a huge range of drinks, but the tax system is also stacked in their favour, which explains why supermarket alcohol is so comparatively cheap.
He said:
There is a lack of a level playing field with the supermarkets. They don’t pay any VAT on food – which we do – and they can use that 20% saving to offset low, loss-leader alcohol prices. And that’s very damaging to the hospitality industry – it’s hard to compete.
The 'Big Four' supermarkets in Harrogate.
A 'sensible, meaningful and manageable move'
There are so many reasons why survival in the hospitality industry is difficult these days that there must be a variety of ways to ease the pressure: tackling any one of them would surely do some good. But what is the best way to achieve pub-boosting results quickly?
Mr Midgley said:
We’re not looking for temporary handouts – we need a longer-term solution so that the hospitality model can thrive and continue to create jobs.
One thing I would urge is a reduction in VAT for hospitality businesses. That’s been introduced in France, Belgium and Sweden and it’s been shown to work. If it was brought down from 20% to 5%, it would relieve the stranglehold on the industry and give it a longer-term future.
That’s a sensible, meaningful and manageable move that would make a difference, almost immediately.
If pubs continue to die, the potential of money coming from them will contract. Reverse that and you can get more tax from them, and a sector in growth.
But if it stays the same, it deters people from taking chances and creating jobs. We’re currently considering looking at other sites, but some days I just think, ‘where’s the incentive for entrepreneurs?’. As things stand at the moment, the risk is just so high.
Photo: Pexels.
The alternative to changing the tax regime is continuing with the status quo, or possibly even further acceleration in the rate of pub closures – and few people would like to see it rise to three a day.
Mr Midgley is in no doubt as to how harmful that could be – both for the industry and for society more widely.
He said:
I’m passionate about pubs in our culture. It needs to be stressed how vital a role they play as a hub of the community. More and more people are feeling lonely and isolated, and so many people are on their screens a lot of the time – the pub plays a huge role as a place where people can actually meet each other.
If we lost that, it would be a really sad loss for our communities and for our heritage.
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